The Association of Superannuation Funds of Australia (ASFA) is calling on the Commonwealth Government to better fund the tax office to audit businesses for unpaid superannuation entitlements and for super to be included in the definition of unpaid employment entitlements under the Fair Entitlements Guarantee.
ASFA CEO Dr Martin Fahy said recent reports show substantial non-payment of what should be compulsory superannuation.
“Non-payment of super is increasing in Australia with at least 690,000 or 6.5 per cent of the workforce affected annually,” he said.
A 2015 report found affected Australians lost an average $3,800 each year or nine months’ worth of payments for someone on average weekly earnings. The cumulative effect of this loss is substantial. An average 25 year old impacted by this for five years loses 14 per cent of their retirement income or $8,000 a year at retirement.
The Australian National Audit Office (ANAO) found audits undertaken by the Australian Taxation Office (ATO) have more than a 70 per cent success rate in identifying unpaid super obligations.
“We are calling for an additional $10 million per year for the next four years to help the ATO detect employers who are short-changing workers,” Dr Fahy said.
“Money that should be going into super and helping drive economic investment and long term improvements in individual retirement outcomes is being lost.
“People need that money to live better post-work and the entire Australian community benefits when the right thing is done for employees. Unpaid super means a drag on age pension expenditures by the government. That is a cost to everyone.”
Dr Fahy said another key area for improvement in Super Guarantee payment outcomes was the treatment of unpaid superannuation in the case of employer insolvency and bankruptcy.
“This area is currently subject to a complex combination of legislative provisions but the focus should be on achieving the maximum possible recovery on behalf of affected employees,” he said.
“It’s rough enough when Australians impacted by insolvency and bankrupt employers lose their job.
“To lose their super too is the ultimate insult because the long-term benefits of compound interest means the loss is long-term and compounding too.”
ASFA estimates it would cost up to $150 million per year to include unpaid Super Guarantee payments in the Fair Entitlements Guarantee administered by the Australian Government, with up to 55,000 affected individuals who would benefit from the initiative annually.
The ATO has previously indicated that about 50 per cent of superannuation debts they deal with relate to insolvency. Australian Securities and Investment Commission (ASIC) data indicates non-payment of super is more common in: accommodation and food services; construction; business and personal services; retail trade; and, transport industries.